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AIG Said to Boost U.S. TARP Recovery to 80% With Payment

Posted on 16 Mar 2012

American International Group Inc. (AIG)’s repayment of $1.6 billion to the U.S. Treasury Department pushed the government’s portion of recouped financial-bailout money to 80 percent, said a Treasury official familiar with the matter.

AIG made the payment today with proceeds from the sale of remaining assets in Maiden Lane II, the vehicle created in 2008 to buy mortgage-linked assets, said the person, who asked not to be identified because there wasn’t a public announcement. That means the government has recovered $331 billion of the $414 billion in Troubled Asset Relief Program funds that were disbursed, the person said.

A rebounding economy and climbing stock markets are allowing companies to unwind bailouts from 2008 and 2009 designed to prevent a collapse of the banking system and protect jobs. AIG, once the world’s largest insurer, was rescued in 2008 in a bailout that swelled to $182.3 billion.

The Treasury sold $6 billion in AIG shares earlier this month, reducing its stake in the New York-based insurer to about 70 percent. AIG purchased $3 billion of the shares. The sale was the second for the department since it converted a preferred stake into 92 percent of AIG common shares in January 2011. The government cut that holding to 77 percent in a May offering.

AIG declined less than 1 percent to $28.08 today in New York and has gained 21 percent this year. The government needs to average at least $28.72 on its share sales to recoup taxpayer funds. It sold AIG shares for $29 apiece in both offerings.

AIG announced a plan March 7 to repay $8.5 billion in obligations to Treasury. Along with the Maiden Lane income, the insurer will use proceeds from selling shares of Hong Kong-based insurer AIA Group Ltd. and escrowed cash from the sale of a unit to MetLife Inc. in 2010, AIG said in its statement. Mark Herr, a spokesman for AIG, declined to comment.

The U.S. government also still owns a majority stake in Ally Financial Inc., after divesting holdings in banks including Citigroup Inc. (C) and cutting its investment in General Motors Co. (GM).